Striking a blow against fascism with commentary on current events, finance, economics, politics, music, art, culture and how to deal with our economic lives being bartered away by the elites who have our financial future all figured out: We'll be paying off their debts forever.

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"We Americans are the ultimate innocents. We are forever desperate to believe that this time the government is telling us the truth." - Sydney Schanberg

"The red-breast whistles from a garden-croft, / And gathering swallows twitter in the skies." - John Keats

"It is not necessary that you leave the house. Remain at your table and listen ... The world will present itself to you for its unmasking." - Franz Kafka

"“We of the craft are all crazy,” wrote Lord Byron about himself and his fellow poets. “Some are affected by gaiety, others by melancholy, but all are more or less touched.”"

"The world is a dangerous place to live; not because of the people who are evil, but because of the people who don't do anything about it." - Albert Einstein

"In my lifetime we've gone from Eisenhower to George W. Bush. If this is evolution, I believe within twelve years we'll be voting for plants." - Lewis Black

"In a time of universal deceit, telling the truth becomes a revolutionary act." – George Orwell

Senator Frank Church in 1975 chaired the Senate Hearings on the FBI’s Cointelpro operation, which spied upon and attempted to infiltrate, disrupt and discredit the peace movement. . . "if a dictator ever took over, (the NSA) could enable to impose total tyranny, and there would be no way to fight back. . . . That capability at any time could be turned around on the American people, and no American would have any privacy left, such is the capability to monitor everything: telephone conversations, telegrams, it doesn’t matter. There would be no place to hide. . . . I don’t want to see this country ever go across the bridge. I know the capacity that is there to make tyranny total in America, and we must see to it that this agency and all agencies that possess this technology operate within the law and under proper supervision, so that we never cross over that abyss. That is the abyss from which there is no return."

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Conservative Animus

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Conservatism is the theoretical voice of this animus against the agency of the subordinate classes. It provides the most consistent and profound argument as to why the lower orders should not be allowed to exercise their independent will, why they should not be allowed to govern themselves or the polity. Submission is their first duty, agency, the prerogative of the elite.

Current Readers

Politicus USA on GOP Fascism

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The entire GOP apparatus is slipping toward fascism and millions of Americans have been indoctrinated to believe that the Bible none of them have read takes precedence over the Constitution none of them have read.

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Waiting for Grand Dad

Cirze's World

Eco Farm Shitakes, Squash, Kale - Cindi, Nicole & Eddie

Ukraine Disinformation Battle: Little Green Men, Hamsters and the Fog of War

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There has always been a gap in how media on both sides of the former Iron Curtain have reported world events, and it’s growing as the crisis in Ukraine escalates. It has become increasingly difficult to obtain reliable information from any side — west, east, or further east — about what is going on in Eastern Ukraine.
While powerful propaganda machines fill the public space with smoke and mirrors, one of the few facts that can be positively established in Eastern Ukraine is that the body count is steadily growing: a testament of just how easy it is for self-interested foreign powers to start, either intentionally or recklessly, a civil war in the heart of Europe. Continuing coverage is available at this link and this link.

Cirze's World

Red Roots Farm - Kristen & Jason - No Sprays/Delicious Veggies!

Fukushima, Japan Disaster Worsens and Spreads

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While the American reactor industry continues to suck billions of dollars from the public treasury, its allies in the corporate media seem increasingly hesitant to cover the news of post-Fukushima Japan. Continuing coverage is available at this link, this link, and this link.

My Blog Fights Climate Change

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Animal Rescue - Click Everyday!

Cirze's World

Paul Krugman:

I don’t think many people grasp just how raw, how explicit, the corruption of our institutions has become.

Yesterday I had a conversation with someone who, like me, spent most of the Bush years as a voice in the wilderness. And he pointed out something remarkable: although those of us who said the obvious — that the Bush administration was fundamentally monstrous — were ridiculed by all the respectable people at the time, at this point our narrative has become everyone’s narrative.

Cirze's World

Paul Craig Roberts:

_________________ US Media
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"Anyone who depends on print, TV, or right-wing talk radio media is totally misinformed. The Bush administration has achieved a de facto Ministry of Propaganda."

"The uniformity of the US media has become much more complete since the days of the cold war. During the 1990s, the US government permitted an unconscionable concentration of print and broadcast media that terminated the independence of the media.

Today the US media is owned by 5 giant companies in which pro-Zionist Jews have disproportionate influence. More importantly, the values of the conglomerates reside in the broadcast licenses, which are granted by the government, and the corporations are run by corporate executives — not by journalists — whose eyes are on advertising revenues and the avoidance of controversy that might produce boycotts or upset advertisers and subscribers.

Americans who rely on the totally corrupt corporate media have no idea what is happening anywhere on earth, much less at home."

_________________ War On Terror
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Roberts asked "Is the War on Terror a Hoax", and claims it has "killed, maimed, dislocated, and made widows and orphans of millions of Muslims in six countries". Roberts called the attacks "naked aggression" on civilian populations and infrastructure which constitute war crimes.

_________________ Republican Party
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Roberts is seriously dismayed by what he considers the Republican Party's disregard for the U.S. Constitution. He has even voiced his regret that he ever worked for it, avowing that, had he known what it would become, he would never have contributed to the Reagan Revolution.

_________________ American Democracy and Oligarchy
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Roberts has been increasingly critical of what he deems as the lessening of democracy in the U.S.; instead accusing it of being run by oligarchs by stating:

"The west prides itself that it is the standard for the world, that it is a democracy. But nowhere do you see democratic outcomes: not in Greece, not in Ireland, not in the UK, not here, the outcomes are always to punish the innocent and reward the guilty.

And that's what the Greeks are in the streets protesting. We see this all over the west. There is no democracy, there are oligarchies, some of these smaller European countries are not even run by their own governments, they are run by Wall Street... There is probably more democracy in China than there is in the west.

Revolution is the only answer... We are confronted with a curious situation. Throughout the west we think we have democracy, we hold ourselves up high, we demonize China, we talk about the mafia state of Russia, we talk about the Arabs and so on, but where is the democracy here?"

_________________ Farewell Speech
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"Truth Has Fallen and Taken Liberty With It,"

Roberts effectively announced his journalistic retirement. The article, published at Counterpunch.org, begins:

"There was a time when the pen was mightier than the sword. That was a time when people believed in truth and regarded truth as an independent power and not as an auxiliary for government, class, race, ideological, personal, or financial interest."

It proceeds to a bitter chronicle of the demise of American intellectual integrity, particularly that of financial journalists and economists. These have been thoroughly corrupted by monetary inducements to misrepresent and ignore what has been, in effect, the systematic dismantling of the nation's productive life, in the name of globalization.

He holds the members of his own journalistic profession largely responsible for abetting relentless outsourcing of American industry, thereby gutting the American middle class and effectively dooming the nation's future.

He describes his own ostracism from mainstream media access, the consequence of his relentless and unflinching criticism of the demolition process over the past decade. His column ends, "The militarism of the U.S. and Israeli states, and Wall Street and corporate greed, will now run their course. As the pen is censored and its might extinguished, I am signing off."

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Cirze's World

Liberal?

"If by a 'Liberal' they mean someone who looks ahead and not behind, someone who welcomes new ideas without rigid reactions, someone who cares about the welfare of the people — their health, their housing, their schools, their jobs, their civil rights, and their civil liberties — someone who believes we can break through the stalemate and suspicions that grip us in our policies abroad, if that is what they mean by a “Liberal,” then I’m proud to say I’m a “Liberal."

John F. Kennedy, 1960

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Citizen's United

"[T]his Court now concludes that independent expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption. That speakers may have influence over or access to elected officials does not mean that those officials are corrupt. And the appearance of influence or access will not cause the electorate to lose faith in this democracy."

Monday, December 29, 2008

An eye for an eye, and pretty soon the world is blind.
I've forgotten where I picked that phrase up, but it seemed like a pretty good one to a peacenik like myself. Oh for a modern-day John and Yoko to lead a peace march through Central Park to promote the ending of the conflict and the beginning of some meaningful, real diplomacy. I'm sure it hasn't happened during the last 8 years. Every time we are treated to the whiny voice of Conleeeeeza Rice pudding trying to explain how the world works I grow ever more fearful of what they must have in store for us.
Is this the longed-for dream of the Bush/Cheney junta? (The world goes to hell in their final days?)
Or is this just the nightmare for everybody else?
The 300 airstrikes since Saturday on the camps in Gaza and the deaths of over 60 civilians, including women and children, must seem like a godsend to our outgoing warmakers. And don't bore me with the fact that the Israelis were attacked first by rock throwers and homemade bomb makers. Somehow, it's not a fair fight.
As a matter of fact, when one stops to think about all the places in the world that are either aflame at this moment or threatening to blow up from the financial fires (Russia, China), you almost have to think that this might have been in the plan.
Could President-Elect Obama have a worse start to his new administration?
And I'm not even mentioning the millions in job losses and over 250 bankruptcies being recorded every day stateside.

Israel widened its deadliest-ever air offensive against Gaza's Hamas rulers Sunday, pounding smuggling tunnels and a central prison, sending more tanks and artillery toward the Gaza border and approving a reserves callup for a possible ground invasion.
Israeli leaders said they would press ahead with the Gaza campaign, despite enraged protests across the Arab world and Syria's decision to break off indirect peace talks with the Jewish state. Israel's foreign minister said the goal was to halt Gaza rocket fire on Israel for good, but not to reoccupy the territory.
With the two-day death toll nearing 300 Sunday, crowds of Gazans breached the border wall with Egypt to escape the chaos. Egyptian forces, some firing in the air, tried to push them back into Gaza and an official said one border guard was killed.
Hamas, in turn, fired rockets deeper than ever into Israel, near the Israeli port city of Ashdod. . . Israel's intense bombings — some 300 air strikes since midday Saturday — wreaked unprecedented destruction in Gaza, reducing entire buildings to rubble.
After nightfall, Israeli aircraft attacked a building in the Jebaliya refugee camp next to Gaza City, killing a 14-month-old baby, a man and two women, Gaza Health Ministry official Dr. Moaiya Hassanain said. Israeli aircraft also bombed the Islamic University and government compound in Gaza City, centers of Hamas power. Witnesses saw fire and smoke at the university, counting six separate airstrikes there just after midnight.
Shlomo Brom, a former senior Israeli military official, said it was the deadliest force ever used in decades of Israeli-Palestinian fighting. "Since Hamas took over Gaza (in June 2007), it has become a war between two states, and in war between states, more force is used," he said.
European leaders called on both Israel and Hamas to end the bloodshed.

Sunday, December 28, 2008

My absolutely favorite number one guilty pleasure is "Delaney and Bonnie and Friends" on the turntable with a refreshing drink at the ready.
THE
BEST
BAND
EVER
Hats off to Delaney Bramlett, perhaps the finest blues, rhythm-and-blues, country, rock-and-roller guitarist/band leader in history. I know he's up there.
Way too soon.
From Shindig1964
Suzan
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Saturday, December 27, 2008

And, as can be seen at the Daily Mail, the investors in this fund only get to litigate the fund directors against Lloyds insurers in London for even more compensation. Done properly the compensation could end up paying out far more than the original fund returns (yes this is sarcasm, it was bound to creep in eventually in yet another swindle like this).
Would that I could believe that Madoff were a good guy who slipped and then became repentant. But given the facts, this simply cannot be true.

So, you already know (emphasis needed here) that the U.S. taxpayers are universally viewed now as chumps and likely to swallow anything (and pay out their entire GDP for the next decade or so in penance for their stoopidity - sort of a malfeasance tax for their bad behavior), right? After all, though lots of angst occurred among the sheeple before the first $750 billion payoff (bailout) to the banksters even began to hit their cash registers, they didn't take to the streets or anything serious, so the next step - the fleecing of the lambs is taking place on schedule. Move along. Nothing to see here.
Heck, it only took me (and I'm not a tax attorney or CPA - and no, I don't play one on TV either) a few minutes after I saw the list of bigtime victims before I thought, "Come on - no one in charge of real assets would have been fooled by the Madoff "Made-up on the Run" Ponzi Scam; how was the due diligence performed even once (let alone dozens of times by top moneylender institutions) on this nonsensical scheme?" Lots of people have now jumped on the UNABLE TO BE BELIEVED team, and perhaps he had a small Ponzi scheme originally, but when you look at the claimed victims, it smells like day-old fish immediately. (And then we have his "confession." Now that is totally unbelievable - and he had no help!) (Emphasis marks and some editing was inserted - Ed.)

This again is absolute nonsense. Any company that I have ever worked for would have known internally that such business was being done, because they are all involved. For instance, a trader goes on buying equities from the world's stock exchanges that go down in price for 5 continuous years, but the company just keeps giving him more money to top up the trading, continues paying his salary and even annual bonus. Absolute rubbish. But assuming this actually did happen, the market risk team would have been watching these losses, as would have the accountants. It is not possible to hide things like this internally for very long, months at the most; 20+ years, NEVER.

And here's where the rationale really breaks down into chocolate-flavored pudding (you know you like this goop - they know you like this goop):

I have acted as a professional consultant to major EC and US financial institutions on corporate and institutional credit risk and the idea that anyone in HSBC or Santander could authorise large investment without the internal checks and controls being employed is almost impossible. To try and believe that EVERY institution that invested in Madoff circumvented their internal control procedures IS impossible.
Why is this important? Simple. If someone approaches the HSBC credit risk team, for instance, with a view to making a loan or investing a sum as large as £600m to what is ultimately a single institution (therefore a single counterparty credit exposure) a significant number hoops would have to be jumped through. Firstly there is the credit officer competence limit, which is the maximum amount that a single credit officer may be allowed to authorise. More than his/her limit must be referred up the credit approval food chain. In an institution like HSBC or Santander etc, £600bn or US$1bn will have been referred to the very top of the food chain, the banks' credit committees at the board level. This is an enormous sum and no lacky is going to be able to approve this by themselves, ever.
When the credit committee are called together to review an application, everything is ready prepared for them, so they can cut to the chase. The lower levels of the credit-approval process will have prepared a summary of all the application documentation, included in the meeting bundle, with the strengths, weaknesses, and other important credit risk points. This application will usually contain a set of audited accounts going back a minimum of 3 years and most likely 5 years. There will be a full credit breakdown of the investment profile of the business, Madoff's hedge fund, looking at how the fund obtains its returns; investment assets and investment methodology. After the committee is satisfied that all the issues and concerns have been addressed they will vote on the approval or otherwise.
So there is no way that Madoff could have been pulling a scam. It would have stood out as clear as day to professional financial analysts, whose only job in life is to examine the management of companies and their reports and accounts, to make sure that all is in order. Its their job, its what they do. They are the world experts in spotting anomalies. The idea that all these professionals in all these companies were all duped is absolute nonsense. It is highly improbable that one such evaluation process could have been fooled, but all of them, never. A Ponzi scheme is easy to spot when you have the audited accounts and the full range of investment assets and investment metodologies employed.
Also, this scam avoided the attention of all the funds employees; accountants, traders, auditors and the US regulators, all of whom are also financial professionals.

So how does it benefit the moneyboys to have this "scam" judged a fraud? Easy, TAXPAYERS PAY OFF (again!)!!!!!!

So why plead guilty? The answer is simple. Look on the net and you will see that because this case is being labelled a fraud, it would appear that investors are going to be able to claim their investment back under the US government's financial fraud protection scheme. A judge has already given his approval in principle for compensation, without any evidence having been presented and financial fraud being demonstrated in a court of law. And it would appear that there will never be such a demonstration in a court of law. Why? It would appear that all the funds financial records are mostly "missing" (rather like Dov Zakheim's US$1.4tn) and those few records that do survive are in a terrible mess.
However, since the guy has pleaded guilty we do not need to demonstrate the fraud, because he says he is guilty.
And look further on the net and you will see that these "victims" have also been told by the US tax authorities that they will probably also be entitled to claim back some taxes on these defrauded sums.
Rather than saying this hedge fund has gone bust, due to its choice of investment assets and investment methologies, a scenario which is highly probable in the current financial paradigm, since all the professionals are predicting that at least 30% of all hedge funds are about to fail, more than 700 of them, the CEO chooses to fess up to fraud. If the CEO admits the fund has gone bust, then all those wealthy members of the Jewish community get nothing, but if the CEO admits to fraud they get their money back as compensation from the US tax payer, just as they are also drawing money back from the tax payers with the other hand.

And you thought they were going to have an unhappy Christmas/Hanukkah.
Suzan
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Friday, December 26, 2008

(File this under Too Much Information at Christmastime.)
Were you aware that "Vito Genovese, a New York mafia leader, was installed as interpreter in the Allied Military Government office of Col. Charles Poletti, a former New York Tammany politician," and that "in 1947 William" (Wild Bill) "Donovan," who was at that time "a corporate lawyer and no longer the head of the Office of Strategic Services (OSS), reportedly financed a May Day massacre of leftists in Sicily, organized by the recently-deported Detroit mafia figure Frank Coppola?" No? Well, I hadn't been either until reading a most illuminating essay by Peter Dale Scott recently (and you can see more here), although I had heard some scuttlebutt about a Coppola being named; the bloodiness of the connection did, however, startle me quite a bit. But that was only the iceberg tip of the amazement I felt later as I immersed myself in this account of the absolutely unbelievable connectedness of the continuing deep-seated corruption we are treated to on what seems like a daily basis now in the "Grand Old (USA) Party." As I read I kept saying to myself that this is quite a fantasy scenario, but how could this be?
The most astonishing part (according to his theory) is that these people (we are informed) aren't really that smarmy at all (take that Blagojevich!) just regular people doing the business of the shadow government - you can ask Nancy or Chuck or Hillary (or even Rahmbo) about this if you're still confused (not to mention the whole BushLeagueCheneGang currently bragging about their part in it) - and they may know intimately. The other troubling thought that constantly recurs is that the same idiots who earnestly believed that invading Iraq and Afghanistan would be just another walk in the park are the extremely well-groomed successors of these original village idiots.

In areas where Communist forces have appeared strong, the United States, at least since 1945, has resorted repeatedly to supportive counterviolence from mobsters involved in the drug traffic.

And although "these arrangements were temporary and ad hoc," they became de rigueur as the progressive-socialist fervor increased in the underdeveloped world.
The connection between Big Georgie (H.W.) Bush being given the most important CIA position (with no prior qualifications to justify this choice) after the helicopter-hanging ignominious end of the Vietnam War and the logical next step Iran/Contra-drug money dealings provides a clear link to the present day neverending Drug War, requiring billions in public funds, supposedly to stop the drug use that so clearly formerly paid and probably still pays for much of this shadow government's activities. (Of course, none of us reality-based lifeforms really believe this scenario, but we also believe in Santa and angels.)

Such arrangements became more centralized in 1948, after the newly created National Security Council created an Office of Policy Coordination (OPC) to carry out "subversion against hostile states" - i.e., conduct law-breaking as national policy. Thanks to OPC, the U.S. began giving significant covert support to organized drug-traffickers around the world, in the Far East, Europe, and eventually the Middle East and Latin America.

It also becomes a lot clearer why the sight of J. Edgar Hoover in a dress was not as outrageous a thought as it became clear it should have been later. But you need to read the whole story. (Emphasis marks and some editing were inserted - Ed.)

These world-wide activities became more and more interrelated. Since at least 1950 there has been a global CIA-drug connection operating more or less continuously. Especially with the passage of time, this connection has contributed to unexplained deep events and the consolidation of the global dominance mentality, at home as well as abroad. More specifically, the global drug connection is a factor underlying such unexplained deep events as the JFK assassination, the second Tonkin Gulf incident of 1964, and Iran-Contra.
The global drug connection is not just a lateral connection between CIA field operatives and their drug-trafficking contacts. It is more significantly a global financial complex of hot money uniting prominent business, financial and government as well as underworld figures. It maintains its own political influence by the systematic supply of illicit finances, favors and even sex to politicians around the world, including leaders of both parties in the United States. The result is a system that might be called indirect empire, one that, in its search for foreign markets and resources, is satisfied to subvert existing governance without imposing a progressive alternative.
One significant organizer of the post-war global drug connection - between CIA, organized crime, and their mutual interest in drug-trafficking - was former OSS officer Paul L.E. Helliwell. Helliwell, who was head of the Special Intelligence branch of OSS in Kunming, and later an officer of OPC and the CIA, was simultaneously the owner of the Bank of Perrine in Key West, Florida, "a two-time laundromat for the Lansky mob and the CIA," and its sister Bank of Cutler Ridge. Here we shall see a number of interrelated mob-CIA money-laundering banks in the global drug connection, of which the greatest was undoubtedly the Bank of Credit and Commerce International (BCCI).

In case you've forgotten, BCCI was the downfall of that liberal paragon, Clark Clifford - Chairman of BCCI (and his law partner Robert Altman - President of BCCI (married to Lynda Carter "Wonder Woman")), Bert Lance, Jimmy Carter's friend and lawyer (remember him?), and many, many country-unidentified Arabs whose role in that criminality was completely obscured by the media coverage; and then they were allowed to plead ignorance of what had been going on with BCCI's Holding Company (sound familiar?) as long as they didn't run banks anymore ("Clifford and Altman have testified that they were throughout this period deceived as to BCCI's ownership of and control of First American and other BCCI entities in the United States, and ignorant of the bank's wrongdoing in any material respect" although documents available now say that their sworn testimony was contradicted by other testimony). When I tried to track down the underlying facts for my own peace of mind, it led nowhere back then (at least not in the news available to the general public), and although bits and pieces about it did slip out eventually, this essay fills in most of the gaps of what were obvious violations of U.S. securities laws by officers of the court at that time. No wonder Raygun's people thought they could do a better (criminal) job.
The thought I'm most unhappily left with after reading as much of this history rend(er)ing as I can tolerate (and happy holidays to you too) is that the majority of the U.S.' world-famous puritanical, church-obsessed, self-congratulatory, largely politically apathetic population are perfectly content with an obviously semi-corrupt (at least) ongoing bipartisan government that provides them (less and less all the time though) with whatever demanded goods and services (toys) that are sufficiently goodwill-engendering/entertaining at the moment, making me wonder how quickly the coming bad times will change this public opinion (and thus the newly-built Halliburton prisons needing to be at the ready).

In this essay I shall first attempt to lay out the complex geography or network of that milieu, which I call the global drug connection, and its connections to what has been called an "alternative" or "shadow" CIA. I shall then show how this network, of banks, financial agents of influence, and the alternative CIA, contributed to the infrastructure of the Kennedy assassination and a series of other, superficially unrelated, major deep events.
In this narrative, the names of individuals, their institutions, and their connections are relatively unimportant. What matters is to see that such a milieu existed; that it was on-going, well-connected, and protected; and that, with increasing independence from governmental restraint, it played a role in major deep events in the last half century.

Tuesday, December 23, 2008

So here we are, looking at an all-too-familiar story. The administration that has brought US the Iraq war and the Katrina response "is locking in another disaster before it leaves town" (as if that will ever happen). What to do? Well, we could have another orchestrated hit to take our minds off of it. (Surprise! Another mysterious plane crash with very little FCM (Fawning Corporate Media) coverage of the facts surrounding it!) That seems to work every time. And then there's that most entertaining holiday cocktail partytidbit explaining how the credit scare was marketed so successfully to the Rethugli-Con-adoring masses. (Don't overread this story of guileless manipulation - the idea of "W" being scared by Bernanke is almost enough high humor to tide you over the holidays.) This tall tale also bears the seeds of the history revisions we've had constantly ladled down our gullets lately as we are told that good-hearted little "W" only wanted to do some good for (to) the poor folk (h/t to Dostoyevsky). (A little editing was required - Ed.)

It was Sept. 18(, 2008,) Lehman Brothers had just gone belly-up, overwhelmed by toxic mortgages. Bank of America had swallowed Merrill Lynch in a hastily arranged sale. Two days earlier, Mr. Bush had agreed to pump $85 billion into the failing insurance giant American International Group.

Current Treasury Secretary Henry M. Paulson, Jr., of the Troubled Assets Relief Program (TARP - the $700+ billion bailout) "with its frequent changes of direction" is not only constantly embarrassing us on an international stage, but he has done his best to "upset the very markets this program was designed to calm."
(*Flash!* There's also the news of Madoff Investor Rene-Thierry Magon de la Villehuchet, who is the first to commit suicide.)
As Alan Blinder, professor of economics and public affairs at Princeton and former Vice Chairman of the Federal Reserve, publicly apologizes for:

It pains me to say this, because I was among the first to call upon Congress to create two institutions to deal with the financial crisis: one to buy and refinance home mortgages, the other to buy what came to be called “troubled assets.” The legislation signed in October empowered the TARP to do both. Sadly and amazingly, it has done neither.
Regarding mortgages, Mr. Paulson is in a tong war with Sheila C. Bair, chairwoman of the Federal Deposit Insurance Corporation, who wants to deploy a small fraction of the TARP money to refinance millions of mortgages. Her plan may not be perfect — whose is? — but she’s pushing in the right direction. But he, apparently, disagrees and has devoted no money to this purpose.
Regarding mortgage-related securities — the “troubled assets” themselves — Mr. Paulson stunned markets on Nov. 12 by announcing that he wouldn’t spend a dime on that purpose, either. Oh? As one of my students asked me the next morning, shouldn’t they at least change the name?
Instead, taxpayer money has been used mainly to recapitalize ailing banks. To be sure, this use of the TARP is perfectly legal. The legislation gives the secretary broad authority to buy “any other financial instrument” that he deems “necessary to promote financial market stability.” That certainly includes buying bank stock.
The question is not one of legality, but of judgment. Old-fashioned believers in democracy may recall that a reluctant Congress was sold on the idea of buying troubled assets, not on injecting capital into banks. No wonder members are crying foul.
In fairness, Mr. Paulson was not alone in advocating capital injections. Many economists and financial experts agreed. But I doubt that many of them intended for the government to buy preferred stock with no control rights, at above-market prices and with no public-purpose strings attached. The automakers are not being treated this way in their $13.4 billion loan.
. . . But suppose you believe (though I don’t) that recapitalizing banks was the best use of all the money. Even then, the secretary’s execution leaves much to be desired. Never mind the lack of transparency and the management issues recently cited by the Government Accountability Office. Think about this:

Treasury has bought preferred stock with no control rights. The 5 percent dividend rate that taxpayers will generally receive is half what Warren Buffett got from Goldman Sachs. Banks receiving capital injections through the front door are generally allowed to pay dividends out the back door. And there are no public-purpose quid pro quos, such as a minimal lending requirement. So banks can just sit on the capital, which is what most of them have done, or use it to make acquisitions, as a few have.

But, back to the future:

And corporate America, eyeing a lucrative market, delivered in ways Mr. Bush might not have expected, with a proliferation of too-good-to-be-true teaser rates and interest-only loans that were sold to investors in a loosely regulated environment.
“This administration made decisions that allowed the free market to operate as a barroom brawl instead of a prize fight,” said L. William Seidman, who advised Republican presidents and led the savings and loan bailout in the 1990s. “To make the market work well, you have to have a lot of rules.”
But Mr. Bush populated the financial system’s alphabet soup of oversight agencies with people who, like him, wanted fewer rules, not more.

So, what's not to like (if you belong to the right clubs)?
Cheers! (Yuk! Nice Christmas present.)
Suzan
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Monday, December 22, 2008

What does it mean for a civilization when the logical consequences of policies gone-wild, ensuring unbridled capitalism and massive deregulation, lead to a world where there is historically high (and largely unreported) unemployment among the young (and for many of the old), and good jobs with benefits, and the expectation of personal and professional growth as well as some type of stability of employment, cease to be the norm?
Greece is currently letting the world know how its youth feel about this climate of hopelessness, and if reports prove true, the German, French and Spanish students will soon be joining the fray. (Emphasis marks and some editing were inserted - Ed.)

Writing for the Associated Press, a similar appraisal was made by Paul Haven, who stated that the “authorities in Europe worry conditions are ripe for the contagion to spread” as the continent “plunges into recession.” Most tellingly, the Scotsman newspaper drew attention to the response of French President Nicolas Sarkozy to the Greek events. Rejecting budget proposals from his own party that he considered too obviously biased toward the wealthy, he remarked, “Look what is going on in Greece.” Sarkozy expressed concern that unrest could spread to France, the Scotsman reported. “The French love it when I’m in a carriage with Carla, but at the same time they’ve guillotined a king,” he said.
The citations above are drawn from leading financial journals, newspapers with a distinctly right-wing colouration and organs generally designated as newspapers “of record.” They are serious appraisals made of a growing threat to the capitalist system posed by a generation of young people, often educated, highly intelligent and articulate, who are living on next to nothing. Told for years that an education was all that was required to succeed, they have no prospects for the future despite their sacrifices and those of their parents.
Faced with governments of the official left and right seeking to make working people shoulder the full weight of the economic crisis, and opposition parties that offer no real opposition to this agenda, young people in Greece have taken to the streets in a mass display of anger and frustration. But make no mistake. We are witnessing the beginning of a profound social shift that must assume political forms that will not be confined to the compromised and discredited trade unions and organisations of the official left.

As our happy-go-lucky boy President "W" jauntily sports about the world on his farewell tour (feigning ignorance or indifference to criticism), we learn from a CNN poll that "George W. Bush has the lowest approval rating of any US president since modern polling began."
Yes, it seems that the 83% of those polled who say that things are worse now than they were during the end of the Bush I reign, surpass the figures of those who thought things were worse at the end of Carter's misnamed "malaise" period and even worse than the figures for the end of Richard Nixon's Watergate break-in and corruption spree.
Urantian Sojourn puts this spin on it:

Nevertheless, Bush is still presumably more popular than cholera, rabies, the Black Plague, and the great Spanish flu pandemic of 1918 that killed between 20-100 million people.
Presumably.

____________________________
I knew as soon as I saw the lips moving on the "get me a" Hankie Paulson cardboard cutout that this was only the first shoe to drop (after all, how could such smart guys make such dumb (and serious dumb) mistakes?). When I read the fine print detailing the lack of requirements for reporting, I was repelled (and enlightened) even further. So it was no big surprise to read that not only were Paulson's mob not going to actually tell the taxpayers where their money had gone, but they offered no apologies - as a matter of fact, the looks on their faces were almost incredulous when presented with the possibility that someone might want to know. You get what you pay for, huh? There is a word to describe this kind of public acceptance of unbelievably bad economic policy, but in my current stupefaction (not really holiday-induced), I hesitate to use it.
And after getting over this bit of bad news for your future, can you sympathize with how the (formerly) rich people felt who had already lost millions in the derivatives con game and then found out that their personal (and charity's) money had been entrusted and then lost by another con(fidence) - institutional bankster - man, who had once been the NASDAQ Chairman? Are you feeling even a little bit sorry for them?

In terms of financial and psychological impact, Bernard Madoff's $50 billion heist certainly ranks as a major ethnic cleansing here in America, a hugely traumatic event for American Jewry. Of course Madoff had clients of every creed and nation, but he made a specialty of trolling for Jewish money. I asked a Jewish woman I know here in California if any in her circle had taken a hit. She looked at me tremulously, shaking her head, on the edge of tears. Though no one was in immediate earshot, she whispered, “They kept telling me to put my money with Madoff. At that time the entry level was $250,000. I dodged the bullet. Some of my friends didn’t. They’ve lost everything. This is Kristallnacht Two.” Her fear and horror would scarcely have been diminished if she’d heard what a perfectly nice young person had remarked to me earlier, apropos the Madoff affair: “Now the rich people will know what it’s like.”
"‘It’s an atomic bomb in the world of Jewish philanthropy,’ Mark Charendoff, president of the Jewish Funders Network, told Anthony Weiss and Gabrielle Birkner of The Forward newspaper. ‘There’s going to be fallout from this for years to come.’ The collapse of the investment firm of Bernard Madoff has opened a black hole at the center of the tight knit circles of wealthy Jews who socialize and do business together, and who, year after year, support Jewish causes. . . .”
Among those apparently taking serious and even financially fatal hits: Yeshiva University in New York; Senator Frank Lautenberg, New York Mets owner Fred Wilpon, real estate and media mogul Mortimer Zuckerman (“significantly hurt”), GMAC Financial Services chairman J. Ezra Merkin (who ran a hedge fund, Ascot Partners, which reinvested many charities’ funds with Madoff), the Elie Wiesel Foundation for Humanity, Steven Spielberg’s Wunderkinder Foundation, Jeff Katzenberg, the Boston-based Robert I. Lappin Charitable Foundation (which has closed its doors), Eliot Spitzer’s family, the Chais Family Foundation, the Carl and Ruth Shapiro Foundation, Hadassah (the Women’s Zionist Organization of America), the United Jewish Endowment Fund of the Jewish Federation of Greater Washington , the Los Angeles’ Jewish Community Foundation’s $238 million Common Investment Pool, the American Jewish Congress, the Technion-Israel Institute of Technology.
It’s a savage body blow to the commercial real estate market in New York. Christine Haughney in Friday’s New York Times quotes Robert J. Ivanhoe, a lawyer who is representing 10 developers and investors who lost $5 million to $50 million each, as saying “The level of devastation, both financial and on a human level, is astounding,” Haughney cites a Manhattan psychotherapist who counsels real estate leaders and bankers as saying “most of the patients he has seen this week have close friends and relatives who lost money with Mr. Madoff. The victims include executives at the global commercial brokerage CB Richard Ellis, most prominently Stephen Siegel, a major Bronx landlord who is chairman of worldwide operations at the brokerage.”
A huge problem is that many developers were using their investments with Madoff as collateral on projects and now banks are saying, “Show us the money.” Residential real estate will take a hit too as people back out of purchases because they’ve lost their money , or abandon coops because they can longer afford the annual fees and mortgage payments.

Pour yourself some holiday cheer and read the rest of this (at least) twice-told tale here.
Are you also wondering where the rest of the money went (assuming that he/they quit paying out when he/they saw the end of the good times coming into view back in September (or before))?
(not really too) Happy Holidays!
Suzan
___________________________

Tuesday, December 16, 2008

Casinos, lottery agencies and racetracks are losing tons of money as gamblers play it safe, laying to rest once and for all the old nostrum that gambling is a recession-proof industry.
The Nevada Gaming Control Board reported last week that revenue at the state’s casinos fell by 22 percent in October, compared with the same month last year. It was the 10th straight monthly decline — and the biggest ever. The story was even worse on the Las Vegas Strip, where the October take was down by 26 percent. The steep downturn has sparked a movement to lower the legal gambling age to 18.
What happens in Vegas may stay in Vegas, to quote the city’s tourism slogan, but gambling business problems are hardly isolated to Nevada. Casinos in Atlantic City, N.J., also reported steep losses in November, the New Jersey Casino Control Commission said last week. Kansas is on the hook for a $25 million deposit it needs to refund to a joint venture that was left holding the bag when Harrah’s, citing its weak financial state, canceled plans to build a giant casino resort in Sumner.
Washington state casinos, meanwhile, reported a 30 percent drop in revenues so far this year, thanks to gamblers who aren’t willing to bet it all these days.
“They come in less often and spend less money,” said Scott Taylor, manager of the Classic Island Casino in Kennewick, Wash.
Randy Black Sr., majority owner of Black Gaming LLC, which runs three casino resorts in Mesquite, Nev., said, “Instead of coming two and three and four times and spending $200, $300 a trip, (gamblers are) coming one or two times and spending $20.”
Black Gaming’s gambling revenue tumbled 28 percent in the third quarter, and the fourth quarter doesn’t look good, either. The company recently laid off about 350 employees at the Oasis, which is closing on Fridays to save money.
. . . For operators of casinos and other gambling concerns, the outlook is as grim as it’s ever been, with executives predicting that no new casino projects will be started for at least five years.
“It’s almost like a perfect storm — in a bad way,” said Mark Nichols, an economist at the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada-Reno.
. . . After record performances in many states in fiscal year 2008, the floor has fallen out from under lottery programs since the new fiscal year started July 1.
. . . Ticket sales for the North Carolina Lottery fell by 9 percent from October to November.
. . . Back in Las Vegas, casino operators are lobbying the Nevada Gaming Control Board to lower the legal gambling age to 18 to help boost their bottom lines.

The good news is that the U.S. should survive a very long recession/Depression (however you want to define the very bad ongoing economy), and that the dollar will still provide solid value (eventually). The trick will be finding something to eat and a warm place to sleep until then.

John Mauldin in Outside the Box presents a condensed version of Gary Shilling's latest Insight newsletter containing his thoughts "on the economy and investing. Last year in his forecast issue he suggested 13 investment ideas, all of which were profitable by the end of the year. It is not unusual for Gary to give us over 75 charts and tables in his monthly letters along with his commentary, which makes his thinking unusually clear and accessible. . . . Gary was among the first to point out the problems with the subprime market and predict the housing and credit crises." (Emphasis marks were added and some editing was necessary for legibility - and, yes, I know it's tooooo long - Ed.)

Semi-Annual U.S. Economic Outlook: Collapsing On Schedule
The recession is now running on all four cylinders. We're referring to the four phases of the downturn that we identified much earlier and discussed in numerous Insights.
Phase 1 - the collapse of the housing sector, touched off by the subprime slime, as we dubbed it, and measured by the ABX BBBindex, started early last year with the $1.8 billion writedown of subprime mortgage securities by big U.K. bank HSBC in February.
Phase 2 - the spreading of the woes to Wall Street, commenced with the implosion of two big Bear Stearns hedge funds in June 2007. These first two phases are largely financial, and persist today.
Housing Horrors
Housing starts have nosedived from 2.3 million, seasonally adjusted at annual rates, in January 2006 to 791,000 in October, a post-World War II low (Chart 1). Meanwhile, homebuilder sentiment is now at record lows. Leaping foreclosures, among other forces, have pushed up the homeowner vacancy rate. Some of the victims of declining homeowner rates are moving into rental apartments as the bubble years' lure of homeownership fades or they lose their houses. But others are doubling up with friends and family, thereby adding to empty house inventories.

Housing Starts Fall Off A Cliff

Foreclosure Sales

As lenders spilled foreclosed houses on the market, they were sold for only 70% of the unpaid loan balance in the third quarter compared with 78% in 2007, and losses averaged 44% of the loan balance compared with 29% a year earlier. With about 40% of existing home sales coming from foreclosures, or "short sales" in which the mortgage amount exceeds the house's value, the prices for selling homeowners and builders are forced to decline to compete.
25% More
Existing home prices are down in October 20% from their peak in October 2005 as measured by the National Association of Realtors, and 21% from their second quarter 2006 peak according to the less-upward biased Case-Shiller index (Chart 2). Curiously, a survey found that in the second quarter, 62% of homeowners believed their houses had appreciated in the last year even though 77% had fallen over that time and only 19% had risen, according to Zillow. Another survey found that 91% believe that a house is the best long-term investment. A third poll revealed that 32% think this is a good time to buy stocks, but 51% believe it's a good time to invest in a home. We wonder if that optimism will persist if our long-held forecast of a 37% peak-to-trough decline holds.
Home Prices Down Over 20% From 2007

Underwater
At present around 12 million homeowners, a quarter of those with mortgages, are underwater with their houses worth less than their mortgages. Among those who bought their homes in the past five years, 29% are underwater. If our forecast of a 37% house price fall is reached, about 25 million, or almost half the 51 million with mortgages, will be underwater. Adding in the 24 million who own their houses free and clear, and one-third of the total will be in trouble. The destruction of the American Dream of homeownership for so many people will force a political response, even though the cost of subsidizing their mortgages down to their house values would be about $1 trillion.
Financial Problems
The woes of financial institutions also persist, fed by bad mortgages and increasingly by other troubled assets. The extreme stress on the financial system here and abroad is manifested in two clear ways: first, the consolidation and disappearance of many previously impregnable financial institutions and second, by the need for huge and continuing government bailout in order to preserve the integrity of the financial structure and, hence, the world's economies.

The list of the departed is well known: Bear Stearns, WaMu, Lehman and Wachovia disappeared while Merrill Lynch arranged a shotgun marriage with Bank of America and Morgan Stanley and Goldman Sachs converted to the safety of bank holding companies.
The FDIC recently announced that the institutions it insures had only $1.7 billion in earnings in the third quarter, down from $28.7 billion a year earlier. And financial troubles aren't confined to banks. Many hedge funds have suffered huge losses on their highly leveraged positions this year. And their sales of securities to limit further losses and to meet investor redemptions are adding downward pressure on many markets. In some, assets are down 50% while others are folding their tents and still others are limiting redemptions, only adding to investor restiveness. Redemptions are expected to jump early next year.
Diversification
Many endowment and pension funds have been hard hit, especially those with heavy alternative investments in hedge funds, private equity funds, venture capital, commodities, currencies, emerging market stocks and bonds, real estate, junk securities, etc. Diversification is a great idea - if it works! But as we've noted continually in Insights for more than 10 years, there are tremendous amounts of hot money flowing around the world. And whether it's managed on the basis of fundamental factors, momentum, technical analysis, etc., it all tends to end up on the same side of the same trade at the same time.
So when stocks get clobbered, as they have since October 2007 (Chart 3), and force out hot money, it will also retreat from otherwise unrelated long positions in, say, grains, to conserve capital. Many institutional investors believe in the Modern Portfolio Theory of diversification, but erroneously thought that alternative investments would have zero or better still, negative correlation with their basic equity holdings. They also became convinced that commodities and foreign currencies were asset classes like equities and bonds, and merited 5%, 10% or 15% of their portfolios. They're learning the hard way that all those correlations have proved to be close to 100% and that commodities and currencies aren't asset classes but speculations.

The Overarching Reality

Washington policymakers do not appear to have understood the overarching reality - the massive and painful deleveraging of the immense leverage accumulated by the household and private financial sectors over the last three decades (Chart 4). They were also initially preoccupied with a philosophy of non-intervention in the private sector and with concerns with creating moral hazard if they bailed out troubled financial institutions. Furthermore, they've been making up the game plan as they go along. Last summer, Secretary Paulson told Congress that the $700 billion bailout money would be used primarily to buy troubled mortgages and mortgage-related securities from banks. Somehow, that would encourage banks to resume lending, but we never understood how.

A TARP For All
Even though the majority of the $700 billion TARP money is yet to be committed, that total is only a small piece of the $4 trillion-and-counting sum the federal government has made to bail out the financial sector.
Included in that total beyond the $700 billion TARP program is $350 billion in FDIC guarantees on bank-issued debt, and Goldman Sachs, JP Morgan Chase, Morgan Stanley and Bank of America quickly raised $26 billion with Citigroup and Wells Fargo planning to follow. Then there's an estimated $1.3 trillion from the Fed to buy frozen commercial paper, $540 billion to buy commercial paper and other short-term debt from money market funds to stop the run on them, the new $200 billion Term Asset-Backed Securities Loan Facility (TALF) to back credit card, auto, student aid and small business loans and the $600 billion to buy mortgage-backed securities and GSE debt.
Worst Since The 1930s
Of course, in what will probably be the worst financial crisis and deepest recession since the 1930s, it's not surprising that Depression-era bailout structures are being copied. The Reconstruction Finance Corp., instituted by President Hoover in 1932, bought positions in over 6,000 financial institutions to the tune of $50 billion, not adjusted for inflation or the growth of the economy since then. The government got senior voting rights to control these firms and barred dividend payments to shareholders until the government was repaid.
The worldwide recession is redirecting sovereign wealth money homeward. For instance, seven sovereign wealth funds in the Persian Gulf region are expected to lose 15% of their value, or $190 billion, this year, cancelling the likely $198 billion growth in crude oil revenues.

It's interesting that the Fed, with its new commercial paper program, is lending directly to nonbank corporations for the first time since the 1930s. But then the Fed can lend to anyone, you included, under "unusual and exigent" circumstances. The Fed is, after all, the nation's lender of last resort.
And don't worry about the remaining $370 billion in TARP money being committed. Detroit automakers want $25 billion. Homebuilders want money from somewhere for their $250 billion bailout, mentioned earlier. Banks not included in the initial nine to receive TARP money in the form of preferred stock purchases worry that if they don't ask to be included, they'll appear too weak to qualify. Many of the nation's 6,000 small, non-publicly traded banks want their share of the government goodies even though they can't issue preferred shares and warrants.
Spreading Financial Woes
As consumers retrench and eliminate discretionary spending, they are increasingly regarding monthly payments on credit cards, auto, student and home equity loans as discretionary. When it's a choice between putting food on the table or making a credit card payment, financial responsibility is suffering. Delinquencies and charge-offs in these consumer loan categories are mounting with a 9% increase in auto loans 30 days past due in the second quarter vs. a year earlier and an 11% rise in those 60 days overdue.
Even upscale-oriented American Express, where over half its revenues come from fees paid by merchants, is suffering as charge volume falls and delinquencies and charge-offs on its credit cards rise, leaping 6.7% in September from 3.6% a year earlier. Consequently, the firm recently became a bank holding company so it could qualify for TARP money and hopes to get a $3.5 billion infusion. Credit card issuer Capital One has received preliminary approval for $3.55 billion in TARP money. Credit card issuers are also reacting to weakening volume and jumping charge-offs by raising interest rates and fees.
Student loans more than doubled from $41 billion in school year 1997- 1998 to $85 billion in 2007-2008, but almost all of the growth was in private loans, with subsidized federal aid relatively flat. And delinquencies are jumping in that segment. SLM, or Sallie Mae, the largest private student lender, reported a delinquency rate of 9.4% in September vs. 8.5% a year earlier. Parents, suffering from stock losses and the disappearance of home equity, are no longer able to bail out their debt-swamped offspring. Meanwhile, SUV and other vehicle owners who are now upside down on their auto loans due to weak used vehicle prices have limited zeal to keep up on loan payments.TALFAdding the general freezing of credit markets to these conditions and it's not surprising that investor buying of securitized consumer loans, which normally provide the funds to make fresh loans, has dried up. In October, there was only one $500 million deal compared to $50.7 billion a year earlier. And the interest cost has leaped. From June to October, the risk premium on a triple A credit card deal jumped from 3.2 percentage points over 2-year Treasurys to 4.67. Treasury Secretary Paulson recently said that that market "is currently in distress, costs of funding have skyrocketed and new issue activity has come to a halt."
So the government bailouts that we predicted in our October Insight have commenced. The Department of Education is buying $6.5 billion in federally-guaranteed loans, which doesn't affect troubled private student loans directly but does bolster the student loan market overall.
Much more importantly, the government in late November initiated the Term Asset-Backed Securities Loan Facility (TALF) under which the New York Fed will extend up to $200 billion in nonrecourse loans to holders of asset-backed securities backed by highly-rated auto, student, credit card and small business loans. The program may be expanded later to include commercial and residential mortgage-backed securities. The Treasury is kicking in $20 billion from TARP to absorb any losses, as noted earlier.
The hope is that this $200 billion infusion will re-ignite consumer loans. But, as discussed in our October report, leaping delinquencies and the eventual huge writedowns by financial institutional holders of bad consumer loan-related securities suggest that the zeal for consumer loans on the part of lenders or investors will remain subdued. Like TARP, TALF is likely to be no more than a bailout for distressed lenders who made a lot of bad loans. Since the Nov. 25 announcement of TALF, yields on bonds backed by credit card and auto loans remain at record levels.
Foreign Financial WoesPhase 2 of the recession, financial woes, are, of course, a global phenomenon. And so are the responses. The U.K. initiated the direct injection of government money into banks to buy preferred stocks. The British government had hoped to attract some private capital into HBOS and Royal Bank of Scotland, but collapsed share prices left the government with most of the new stock. Barclay's avoided government help, but with its stock down 70% this year, it may ultimately end up with a third of the bank owned by Middle East investors as it raises $10 billion. The Bank of Japan is injecting another $32 billion into the financial system by expanding lending and easing collateral requirements.
Switzerland depends heavily on her reputation as a super-safe haven for international money, and her financial services industry contributes 11.4% to GDP and employs 5.9% of her workforce. Yet the condition of her banks has deteriorated to the point that in October, her Economics Minister had to state publicly that the government would not allow big banks UBS and Credit Suisse to fail. The government is injecting $5 billion into UBS to back $50 billion in illiquid UBS assets. That bank has suffered over $40 billion in losses due to bad mortgage-related securities.
Credit Suisse is in better shape but suffered a $2 billion third quarter loss due to writedowns on mortgage securities and unsold buyout loans as well as currency trading losses. The bank still holds $26 billion in leveraged loans and conventional mortgagerelated securities. Both banks are closing their bond funds for outside investors due to huge withdrawals following losses.
Meanwhile, the Netherlands agreed to inject $13 billion into the banking and insurance giant ING. In 2000, the Spanish central bank introduced its "dynamic provisioning" system that required Spanish banks to build up considerable reserves against potential future losses. As a result, Spanish banks began this year with 200% coverage of nonperforming loans compared with 59% for the average EU bank in 2006. Still, Spain recently set aside $41 billion to fund illiquid assets of her banks. And turbulent market conditions prompted Banco Santander, Spain's largest bank, to unexpectedly announce last month a $9 billion rights issue.
Russia has been floating on a sea of crude oil, but has sunk along with oil prices. Russians are fleeing the ruble for dollars and $83 billion left the country from August to October. The government has raised interest rates and spent heavily to cushion the currency's descent and avoid a repeat of its 1998 collapse. Still, the ruble is down 5% from its August high, and a halving of its current value is forecast. Meanwhile, plunging crop prices and a lack of credit is curtailing Brazil's soaring farm sector.
In Asia, Pakistan, which reluctantly sought a $7.6 billion IMF loan, really needs $10 billion to $15 billion to prevent economic collapse, government officials say. Dubai's pell-mell economic growth has been heavily financed by international debt that may be hard to refinance. South Korea, responding to shortages of foreign currency for her banks and businesses, in October announced a $100 billion government guarantee on foreign currency loans and a $30 billion infusion of dollars into her banks. More recently, that country has problems with high household debt, which leaped from 38% of GDP in 1997 to 66% last year and is probably higher today. And rising credit costs and falling stock and corporate bond prices are slashing the profits of Japanese banks and their ability to provide capital to the international financial system.
Central Bank Responses
Central banks have responded to the global financial crisis in three ways. First, the Fed cut the discount rate and then the federal funds rare repeatedly, starting in August 2007. The Fed has continued this traditional easing approach and other central banks have followed more recently and aggressively, including the European Central Bank, the Bank of England and the central banks of India, China, Australia, Norway, Sweden South Korea, the Czech Republic, Switzerland, Japan and even Indonesia.
Nevertheless, it became clear early on that rate cuts were of limited value since banks were so scared that they didn't want to tend to each other much less customers. The spread between the London Interbank Lending rate on U.S. interbank loans and Treasury bills, which leaped in the summer of 2007, remains wide. Furthermore, central bank rates are approaching zero at which point, as we understand it, they'll stop falling. So the ammunition of rate cuts is almost all shot off. The horse didn't want to voluntarily walk to the water and, besides, the pond is almost empty. Fed Chairman Bernanke recently said, "The scope for using conventional interest rate policies to support the economy is obviously limited."
So the Fed moved quickly to step 2, leading the horse to the water. It introduced a succession of facilities to auction money to member banks, make it available to nonbank government security dealers, etc. The ECB and the Bank of England introduced similar facilities. Last August, the People's Bank of China, her central bank, relaxed credit quotas so most banks can lend 5% more this year and, more recently, allowed local companies to easily sell yuan-denominated debt of three-to-five years' duration. Then China, it increased quotes for state-controlled lenders by $14.5 billion this year, encouraged local governments to support credit guarantee firms and opened new financing channels including loans for mergers and acquisitions and for consumer finance.
India's central bank has repeatedly reduced bank reserve requirements as has China's. And the Fed has attempted to satisfy foreign banks' gigantic demand for Treasurys by mushrooming its currency swap agreements with foreign central banks and then providing unlimited dollars to the ECB, Bank of England and Swiss National Bank for lending to local banks. The top policymakers of the cautious ECB recently called for an "abundant and generalized" capital infusion into banks. But all these central bank efforts resulted in the proverbial pushing on a string. The funds have stayed in the banks and haven't been lent out and entered the money supply to any meaningful degree as banks want nothing but Treasurys. The central banks led the commercial bank horse to water, but he wouldn't drink.
So it's on to step 3 with the Fed and other central banks, as well as governments, investing directly in Fannie and Freddie, AIG, banks, credit card issuers, insurers, etc. here and abroad, buying commercial paper and, most recently, purchasing indirectly credit card, auto, student and small business loan-backed securities and maybe extending later to commercial and residential mortgagebacked securities as well as subsidizing mortgage rates, as noted earlier.
Washington officials cringe at the suggestion that these measures amount to "quantitative easing," the Japanese policy initiated in 2001, because it failed to rapidly spur Japanese bank lending and the economy and arrest deflation. The Bank of Japan drove its target rate to zero with no effect and then tried to hype the quantity of money by buying government bonds, asset-backed securities and even stocks.
Current quantitative easing by the Fed may not be any more successful than it was in Japan since the global financial system is in a classic liquidity trap, as in the 1930s when bankers were defined as people who wanted to lend to those who didn't need to borrow and didn't want to lend to those who did. Today, banks don't want to lend to anyone but the U.S. Treasury.
Consumer Retrenchment
The financial crisis spawned by the collapse of the residential mortgage market and the follow-on Wall Street woes obviously just had to depress the goods and services economy, and it has in Phases 3 and 4 of the unfolding recession. With the collapse in stock prices and evaporation of home equity, consumers have no other meaningful source of borrowing to fund their spending growth in excess of their after-tax income gains. Notice that home equity withdrawals through cash-out mortgage refinancing and home equity loans reached about $900 billion at annual rates, or around 10% of consumer spending. Now it's negative as principal repayment exceeds home equity withdrawals. So consumers' 25-year borrowing and spending binge, as witnessed by their quarter-century saving rate decline (Chart 5) and borrowing rate surge (Chart 6), is over.
U.S. Personal Savings Rate

Total Consumer Debt and Debt Service

In addition, Americans, especially postwar babies, have saved little for retirement as they concentrated instead on spending. The nosedive in stocks has only made retirement prospects more bleak. In the last 15 months, $2 trillion has disappeared from workplace retirement accounts, including 401(k)s, which now are the primary saving vehicle for 60% of employees.Jobs
As the housing and financial sectors continue to drop and U.S. consumers retrench, layoffs and unemployment will continue to mount. Payroll employment, which fell 533,000 in November (Chart 7), will probably continue to see monthly declines of 500,000 and the unemployment rate will likely exceed 8% by the end of 2009.Payroll Employment Difference from Preceding Month

Housing and financial services job cuts are already large and more are coming. But job losses have spread well beyond housing and finance. Manufacturing jobs will continue to be lost as consumers buyfewer domestic goods and foreigners buy fewer American-made products. Retail jobs, normally the employment of last resort for the newly unemployed, are shrinking rapidly. Retail trade employs 10% of the total, but since November 2007, accounted for a quarter of jobs lost, or 320,000, as consumers cut their spending. And another 209,000 retail employees had their full-time hours cut to part-time. Estimates are that 6,100 U.S. stores - ranging from mom-and-pops to major chains - will fold this year, up 25% from 2007, and followed by 14,000 stores in 2009.Impotent Monetary Policy
Conventional monetary policy ease through central bank target interest rate cuts at present is nearly useless, i.e., pushing on a string. Qualitative easing, now actively pursued by the Fed and the Treasury and by central banks and governments abroad, will probably at best only stabilize demoralized financial structures by substituting government securities for questionable assets with little near-term rejuvenation of lending and economic activity.
Also, bear in mind that in democracies, governments are almost guaranteed to be behind the curve in dealing with financial and economic crises. That's because voters elect them to respond to their concerns, not to act in anticipation of yet-unseen problems. Politicians are responders, not planners. In 2006, neither voters nor politicians wanted to prepare for a mortgage market collapse, but voters demanded and got swift action after the crisis unfolded in 2007 and this year.
This means that any resuscitation of the global economies falls on fiscal policy and, as usual, the effects will be delayed, influencing the recovery after the recession rather than shortening its normal course. The incoming Obama Administration is, of course, talking about a sizable fiscal package, perhaps $500 billion to $700 billion, or 3.5% to 5% of GDP.$700 Billion In Perspective
That's a lot compared to the size of post- World War II recessions (Chart 8). Notice that the 1957-1958 recession, the most severe so far, has a peak to trough decline in real GDP of 3.7%, and the long and deep 1973-1975 downturn saw a 3.1% decline. We're forecasting the most severe recession since the 1930s with a 5.0% decline. You may think that a 5% decline is not a lot, but bear in mind that recessions are more interruptions in growth than economic collapses -- growth that business, consumers, employees and government assume will continue without interruption. Similarly, the 21% decline in the Case-Shiller house price index so far (Chart 2) is small compared with the more-than-doubling during the bubble years. Still, it's very painful for those who made small downpayments at the top and those who extracted their equity when prices were still high.
Even a $700 billion fiscal package would probably have limited impact on the recession, and not start to be effective until the end of 2009. And even then, the effects will probably barely offset the negative cumulative recessionary forces. Obama says his proposal will create 2.5 million jobs over two years. But as discussed earlier, payroll declines are likely to continue to run 500,000 per month, so his program would only offset five months of recessionary losses.

Phase 4
Phase 4 of the recession, its globalization, is clearly underway with almost every major country's economy falling whether or not the official recession label has yet been applied. One indicator of weakness is the 2.4% decline in global semiconductor sales in October after a 2.1% fall in September from a year earlier, reflecting softness in computer and cell phone sales. The worldwide turndown is driven by housing slumps, notably in Ireland, the U.K., Spain, Australia and China. U.S. financial woes have spread to almost all major financial institutions worldwide. And consumer spending has been weak in Europe and Japan. U.S. consumer spending accounts for 71% of GDP but less than 60% in all other G-7 countries except the U.K. Sure, much more of healthcare and education expenditures tend to come from government, not consumer pockets in those lands, but households have traditionally been more cautious spenders than Americans, especially in recent years.
And this introduces another key reason for global recession - retrenchment of U.S. consumers, which depresses U.S. imports on which the rest of the world depends for growth. The huge U.S. trade deficit is the counterpart of the rest of the world's huge surplus.
Commodities
Obviously, the commodities boom is over (Chart 9). Prices of energy, base and precious metals and agricultural products are all down significantly from peak prices. The global recession has reversed the earlier excess of demand over supply.
Also, institutional and individual investors who earlier rushed into commodities under the belief that they are a legitimate asset class like stocks and bonds are stampeding out even faster. The financial crisis has also made investors wary of structured notes and other commoditylinked instruments -- and of the firms espousing them.
Tsunami In The Swimming Pool
As noted at the outset, the first two phases of the recession were largely financial, the residential mortgage collapse and the following Wall Street woes. Then, like a tsunami in a swimming pool, that financial tidal wave rolled to the other side and inundated the goods and services economy, with Phase 3, consumer retrenchment, and Phase 4, global slump. Now the tsunami is being reflected back to the financial side of the pool in three ways.
First, retrenching consumers will keep pushing up delinquencies on credit cards, home equity, auto and student loan debt, which will result in big writedowns for their many institutional holders. Collectively, these four categories amount to $4.4 trillion, dwarfing the $0.7 trillion in subprime loans.
Commercial real estate debt is the second problem area, and of the $3.5 trillion outstanding, $800 billion is in commercial mortgage- backed securities and $2 trillion in commercial mortgages held in regional and community banks. As vacancies rise, big writedowns will follow.
Third is nonfinancial leveraged loans and junk binds. Delinquencies have barely risen from rock bottom levels, but will as anticipated by yield spreads and 20% junk bond yields. Recession-depressed revenues here and abroad, collapsing commodity prices (Chart 9) and the leaping dollar that will turn earlier currency translation gains to losses, will all slaughter the corporate earnings of nonfinancial corporations, so far relatively untouched by the financial recession. So delinquencies and charge-offs of junk securities will leap and many investment-grade debts will be pushed into junk territory. Junk bond spreads vs. Treasurys now imply a 21% default rate, higher than in 1933 at the bottom of the Depression. Financial institutions also own a lot of the $3.7 trillion in leveraged loans and junk bonds.
If the tsunami moving from the goods and services side of the pool does considerably more damage to the financial side, it will again be reflected back and even tighter financing will devastate the real economy. Policymakers here and abroad, of course, are trying to erect baffles in the form of bailouts in the middle of the pool to dampen the waves. They are learning that they have to build those baffles bigger and stronger to prevent the waves washing over them. Their moves from Fed interest rate cuts to massive quantitative easing, described earlier, shows they're making progress.
Recession Ends When?
If policymakers succeed in containing the mortgage mess and bailing out financial crises related to consumer borrowing, commercial real estate and junk securities - and other financial problems we haven't explained in detail - then the recession may well end at the end of 2009 as massive fiscal stimulus begins to take hold. If not, it probably will extend well into 2010 and perhaps beyond.
To end the crisis, four developments are needed, in our view. The elimination of excess house inventories will probably continue until at least the end of 2010, as discussed earlier. The writedowns and recapitalizations of financial institutions - at least those related mainly to mortgage-related problems that have unfolded so far - are well along.
Subsidizing the mortgages of underwater homeowners is beginning to develop. And of course the quicker the excess house inventories are eliminated, the more limited will be further house price declines and the fewer will be the additional homeowners who will slip under water. Bailouts of bad loans and securities in the three additional areas we've identified are big unknowns in terms of cost and feasibility. Nevertheless, policymakers are gaining experience as they grope their way through the current round of bailouts and may be real pros when further big problems surface.
The Dollar
At the end of last year, we forecast that the dollar would end its seven-year slump and rally later in the year against most currencies, but not the yen. And it did, starting in July. It was obvious a year ago that far too many were negative on the greenback. As with commodities, many institutional and individual investors considered foreign currencies as an asset class, worthy of a certain percentage of their portfolio.
Much more importantly, we were forecasting a major global recession and reasoned that, as usual in times of trouble, the dollar would be the global safe haven. We didn't expect the U.S. economy to improve but that the rest of the world would join America in the tank. The greenback would be the best of a universally bad lot. We expect the dollar to keep rising for the next 5 to 7 years, continuing the long-run pattern.

Monday, December 15, 2008

I'm sure Rahmbo will come out of the Blago horror showsmelling like a rose (or maybe skunk cabbage?). After all, it's not illegal to talk with a Governor about whom is the wisest choice for the Senate seat of the now President-Elect (yes, I'm just guessing here, but it could have happened); on the other hand, it is interesting to find out that after making his pile by using "his political connections to broker major deals while at the (Wasserstein Perella) firm. (One deal was a $16 billion merger that created Exelon Corp., now one of the nation's largest electric utilities. Another involved SBC Communications, the telecommunications company run by William Daley, Clinton's commerce secretary and the brother of Chicago's mayor)" that he was accused by his Republican opponents of using his own money ($450,000) to buy his seat in Congress (shades of Hillary and everyone else who lent themselves money for political power (gasp - fake horror!). And there is a very good reason why he is deemed one of the Chicago "Untouchables."

After Emanuel left banking to run for Congress, members of the securities and investment industry became his biggest backers, donating more than $1.5 million to his campaigns dating back to 2002, according to the Center for Responsive Politics.
Mr. Emanuel also leaned heavily upon the industry while he was chairman of the Democratic Congressional Campaign Committee during the 2006 midterm elections. Financial industry donors contributed more than $5.8 million to the committee, behind only retirees.
Once he reached Congress, Emanuel served on the Financial Services Committee, which handles legislation involving financial markets and banks.

Isn't it nice to see the Democratic politicos able to use the wheels of capitalism to fund the good guys? Kinda like what happens on K Street in D.C. with each new administration.
Enough Chicago fun (or even New York fun as Caroline Kennedy announces she is asking Governor Paterson to appoint her to Hillary's seat). Back to the real business of trying to fathom the origins and reach of the U.S.'s current political and financial calamities.
After the much-covered Grand Tour/preening around of our (ex-good guy to have a beer with) self-appointed "Decider," and his laughing off of an Iraqi reporter's (Muntadhar al-Zeidi - who "stood up about 12 feet from Mr. Bush and shouted in Arabic: 'This is a gift from the Iraqis; this is the farewell kiss, you dog!' He then threw a shoe at Mr. Bush, who ducked and narrowly avoided it" - now jailed in U.S.-owned and -controlled Iraq after being severely beaten by the Iraqi security forces*) response who had undoubtedly suffered enough personal abuse, if not murders or perhaps the extradition of family members due to "W"'s policies, I keep coming back to the same thoughts: "Why would "W" ever leave? How can he leave safely?"
If he leaves and the duly-elected Barack Obama takes over the helm of government on January 20, won't he be putting every well-connected and monied enterprise that chose him for that position in jeopardy (and ultimately exposure to criminal charges)? And if these power-brokers were able through their control of the media (and possibly international events) to have solidified his ability to be at the apex of power in order to guarantee their influence over and control of the government's purse and world events, wouldn't they be lax in their planning if they allowed someone else to assume the position (so to speak)? Granted, Obama is doing everything humanly possible to allay the suspicions of those on the right about his left-leaningness, but it still doesn't ring true that they would leave willingly with so many shoes left to drop financially. (And please let me say that I absolutely adore his choice for Secretary of Energy!)
As the U.S. prepares to send an enormous number of new troops into Afghanistan (and perhaps Iraq as well) and continues to make noises about how Iran is a current threat to the U.S. (accompanied by an incoming Secretary of State (Hillary) who has already threatened to wage nuclear conflict to stop their use of nuclear power), we would do well to consider the words of Barbara Lee as she voted "No" three days after 9/11 to the plan to attack Afghanistan:

on Sunday morning, viewers across the country saw Barbara Lee speaking on the House floor three days after 9/11 -- just before she became the only member of Congress to vote against the president's green-light resolution to begin the U.S. military attack on Afghanistan.
"However difficult this vote may be, some of us must urge the use of restraint," she said. The date was Sept. 14, 2001. Congresswoman Lee continued: "Our country is in a state of mourning. Some of us must say, Let's step back for a moment, let's just pause just for a minute, and think through the implications of our actions today so that this does not spiral out of control."
And she said: "As we act, let us not become the evil that we deplore."

These thoughts occurred to me during the weeks after the 9/11 attacks when I was teaching at a small university in North Carolina where in every class I tried to help the students make sense of an attack by (mainly) Saudi Arabians supposedly under orders from a very well-connected Saudi Arabian who was the scion of the family that had been incredibly enriched by the building projects stemming from the money connections arising from deals struck between the Saudi royal family and the Bush/Raygun coalition.
During that increasingly fearful time, I asked my class questions (and they asked me many also) about the reporting of the strike on the World Trade Center, the fall of the buildings and the strange idea that U.S. officials knew almost immediately exactly who had been the perpetrators. I won't go into that evidence in detail here, but I did so in order to help my students clarify their feelings and fears about an event that seemed to be cloaked in secrecy no matter how loud and pervasive the reporters' questions were. One issue that dominated our discussions again and again was "How do you wage an effective war on a concept - a strategy - a tactic?" The War on Terror at first consideration seemed like an off-the-cuff idea ventured in an old-time, smoke-filled room by a politico straining for a task vague enough to be a neverending quest requiring constant flailing at the dark leading to (perhaps) permanent political dominance by those in power. But I didn't actually mean to get into the Rove/Cheney conspiracy for permanent Republican control of the USA now. That's been covered elsewhere although it always seems to be a logical next thought at this conversational juncture.
Robert Parry addresses these issues in his book (which I recommend as a fine Christmas present for true patriots (whoever they may be)) Neck Deep: The Disastrous Presidency of George W. Bush. What I've admired for some time now about Parry (and his sons who share writing credit with him) is his single-mindedness in trying to fathom not only who this First Bumbler is, but how he came to be seen as someone with the competence to run the government of the most complex political entity in the history of the world after a lifetime of failed executive ventures that always led to his being bailed out by his Father's friends, and essentially walking away enriched by other people's money.

In Campaign 2000, the Republican advantages in media guaranteed a rosier glow around GWB's attributes and a harsher light on Al Gore's shortcomings. Many voters said they found Bush more likable - "a regular guy" - while viewing Gore as a wonky know-it-all, who "thinks he's smarter than we are." That was, at least in part, a reflection of how the two candidates were presented by the dominanat news media outlets, from Fox News to The New York Times. For his part, Bush exploited the anti-intellectualism of many Americans to his political advantage, even disparaging his former classmates at Yale as "so intellectually superior and so righteous."
Many Americans also came to view Bush as that natural leader they often encounter in their everyday lives. He was, in a sense, the alpha male on the cruise ship, who would lead the pack from the elevator to the all-you-can-eat buffet bar, the guy who wuold keep everyone tittering with jokes at the expense of others. Blessed with a full head of hair himself, Bush especially enjoyed poking fun at bald men, sometimes playfully rubbing their pates in public or making their baldness the butt of his jokes.
The talented Republican image-makers turned Bush's banter into proof that he was a "politically incorrect" politician who didn't play by conventional rules. He was, they said, a refreshing alternative to the endless parade of consultant-driven, poll-tested candidates - though, in reality, Bush's image was as consultant-driven and poll-tested as anybody's, down to his purchase of a 1600-acre ranch in Crawford, Texas, in 1999, just before running for the White House.
Then, after the terrorist attacks on New York and Washington, less than nine months into Bush's presidency, the American people invested their hopes in Bush's natural leadership skills. The U.S. news media and the opposition Democrats also granted Bush extraordinary deference.
Bush's political advisers, his neoconservative foreign policy aides, and his allies in the right-wing media saw the 9/11 crisis as an opportunity to strengthen their ideological grip on power. They could use it to demonize their remaining liberal critics, settle some old scores in the Middle East, and possibly lock in permanent Republican control of the U.S. government.
It was in that climate of both voluntary and enforced unity that Bush sought a fundamental transformation of the U.S. constitutional system, asserting what his legal advisers called the "plenary" - or unlimited - powers of Commander-in-Chief at a time of war.
Under Bush's post-9/11 presidential theories, he could ignore laws passed by Congress. He simply attached a "signing statement" declaring that he would not be bound by any restrictions on his authority. As for laws enacted before his presidency, those, too, could be cast aside if they infringed on his view of his own power.
Bush could override constitutional provisions that protected the rights of citizens. He could deny the ancient right of habeas corpus guaranteeing due process and a fair trial - if he designated someone an "enemy combatant." He could order warrantless wiretaps, waiving the Fourth Amendment's requirement for court-approved search warrants based on "probable cause."
He could authorize CIA and U.S. military interrogators to abuse and torture captives if he thought that was necessary to make them talk. He could order assassinations of anyone he deemed a "terrorist" or somehow linked to "terrorism." He could take the nation to war with or without (C)ongressional consent.
Also, Bush's "war on terror" was unique in American history because it knew no limits either in time or space. It was, by definition, an indefinite conflict fought against a vague enemy on a global battlefield, including the American homeland.
After reviewing Bush's broad assertions of power, former Vice President Al Gore asked in a 2006 speech: "Can it be true that any President really has such powers under our Constitution? If the answer is 'yes,' then under the theory by which these acts are committed, are there any acts that can on their face be prohibited?"
The answer to Gore's rhetorical question was clearly "no." Theoretically, at least, there were no boundaries for Bush's plenary powers. In the President's opinion, his powers were constrained only by his own judgment. He was as Bush called himself the nation's "war president," "the decider," "the unitary executive."
Indeed, looking at Bush's arrogation of powers in total, the troubling conclusion was that the nation's treasured "unalienable rights," which were proclaimed in the Declaration of Independence and enshrined in the U.S. Constitution, no longer applied, at least not as something guaranteed or "unalienable." They were now optional. They belonged not to each American citizen as a birthright, but to George W. Bush as Commander in Chief who got to decide how those rights would be parceled out.
Under Bush's theory of his boundless powers, the only safeguard left for American citizens - and for people around the world - was Bush's assurance that his limitless authority would be used to stop "bad guys" and to protect the homeland.
Patriotic Americans would not feel any change, he promised. They could still go to their jobs, to the shopping mall or to baseball games. Only those who were judged threats to the national security would find themselves in trouble. That list kept growing, however, to include terrorist "affiliates," "any person" who aids a terrorist, and government "leakers" who might divulge Bush's secret decisions.

- - - - - - - -

*Mr. Maliki’s security agents jumped on the man, wrestled him to the floor and hustled him out of the room. They kicked him and beat him until “he was crying like a woman,” said Mohammed Taher, a reporter for Afaq, a television station owned by the Dawa Party, which is led by Mr. Maliki. Mr. Zaidi was then detained on unspecified charges.
(Bush later) called the incident a sign of democracy, saying, “That’s what people do in a free society, draw attention to themselves,” as the man’s screaming could be heard outside.
But the moment clearly unnerved Mr. Maliki’s aides and some of the Americans in Mr. Bush’s entourage, partly because it was televised and may have revealed a security lapse in the so-called Green Zone, the most heavily secured part of Baghdad.
In the chaos, Dana M. Perino, the White House press secretary, who was visibly distraught, was struck in the eye by a microphone stand.

PLUS ONE! Must give a shout-out to Driftglass' Sunday Morning Mouse Circus Coming Down. It almost makes it worth living through these stroked-out, waiting-for-the-gong weeks before total annihilation descends. (Great HST tributes found here.)

Carly Fiorina, Failed CEO of Hewlett-Packard: Having driven HP into the ground and advised the McCain campaign into oblivion, I apparently still have a job. So wheeeeee!

Cirze's World

Cirze's World

Beth and Lily Calmly Monitor Farmers Market Traffic

Cirze's World

Oscar Wilde

"I choose my friends for their good looks, my acquaintances for their good characters, and my enemies for their good intellects. A man cannot be too careful in the choice of his enemies."
Oscar Wilde, The Picture of Dorian Gray, 1891

Harold Pinter

It never happened. Nothing ever happened. Even while it was happening it wasn’t happening. It didn’t matter. It was of no interest. The crimes of the United States have been systematic, constant, vicious, remorseless... while masquerading as a force for universal good. It’s a brilliant, even witty, highly successful act of hypnosis.

Chickenhawks Galore

Peace

"A man of peace is not a pacifist; a man of peace is simply a pool of silence. He pulsates a new kind of energy into the world, he sings a new song. He lives in a totally new way his very way of live is that of grace, that of prayer, that of compassion. Whomsoever he touches, he creates more love-energy. The man of peace is creative. He is not against war, because to be against anything is to be at war. He is not against war; he simply understands why war exists. And out of that understanding he becomes peaceful. Only when there are many people who are pools of peace, silence, understanding, will the war disappear."